Appeal from the United States Bankruptcy Appellate Panel for the
Eighth Circuit.

[9]

Submitted: June 14, 2000

[10]

This appeal grows out of a bankruptcy proceeding initiated against
Wintz Companies in which the trustee moved to avoid several transfers as
fraudulent conveyances and to approve sales of certain estate
properties. The bankruptcy court *fn1
authorized the sales, and the Bankruptcy Appellate Panel *fn2
affirmed. George Wintz and Wintz Properties appealed, but by the time of
oral argument the only remaining controversy on this appeal related to
approval of the sale of a property located on Terminal Road in
Roseville, Minnesota. We affirm.

[11]

In the early 1990s, George Wintz owned a number of companies,
including Wintz Properties, Inc., a real estate management company, and
Wintz Companies, a trucking company doing business under the name of
Milbank Freightways. Wintz Companies held fee interests in two Minnesota
properties: a warehouse and nine hole golf course located at 13500 South
Robert Trail in Rosemount and a warehouse at 2500 Walnut Street in
Roseville. It also had a long term leasehold interest in a truck
terminal that served as its primary place of business at 2323 Terminal
Road in Roseville. Between 1993 and 1995, Wintz and Wintz Companies
borrowed more than $11 million, using the latter's interests in the
three properties as collateral. In August 1995, the Internal Revenue
Service filed federal tax liens of approximately $3.4 million against
Wintz, Wintz Companies, Wintz Properties, and other entities. The liens
grew out of tax liabilities of two other Wintz corporations: Wintz
Parcel Drivers, Inc., and Wintz Freightways, Inc. Between December 1995
and January 1996, Wintz Companies sold occupancy interests in the three
parcels in Rosemount and Roseville to Wintz Properties, which
subsequently sold its interest in the Rosemount property to Spindrift,
Inc.

[12]

An involuntary bankruptcy petition was filed against Wintz Companies
in August 1997 under Chapter 7 of the United States Bankruptcy Code.
After Charles Ries was appointed trustee for the bankruptcy estate, he
moved to set aside as fraudulent conveyances the transfers Wintz
Companies had made to Wintz Properties and to recover the property
interests for the estate. The bankruptcy court granted partial summary
judgment in favor of the trustee, voiding interests claimed by Wintz
Properties and Spindrift in the parcels.

[13]

At the same time that the trustee was attempting to reclaim the estate
interests in these properties, he was soliciting offers for them through
a professional real estate agent. The trustee used the same bidding
process for each of the properties. Prospective purchasers were given
notice of the opportunity to submit written bids on the properties; the
trustee then allowed the three highest bidders on each to submit
additional bids. The process also permitted a putative purchaser a 'last
look': the purchaser would be able to submit a new bid if there was an
objection to the adequacy of the purchase price before the sale closed.

[14]

In July 1998 the trustee filed separate motions for judicial approval
of the sale of the three property interests. He proposed selling the
Terminal Road interest to American Freightways, Inc. for $2.5 million;
the Walnut Street interest to Stan Koch & Sons Trucking for $3
million; and the Rosemount interest to Spindrift, Inc. for $6 million.
The trustee and American Freightways subsequently modified the terms of
sale for the Terminal Road property to account for defaults under the
lease and to obtain consent from the lessors to the transfer of the
leasehold. *fn3 The parties also
agreed that the trustee would make certain repairs prior to transfer and
would escrow funds to remediate any environmental problems that might be
revealed by a study to be carried out by American Freightways. The
purchase price was reduced to $2.1 million, and the net sale proceeds to
the estate amounted to $1.5 million, after deductions for repairs and
escrow funds. The notice of sale on the amended sales terms was served
on September 4, 1998 on all parties in interest, including the previous
high bidders, and a hearing was held on September 17, 1998. No new bids
were submitted.

[15]

The bankruptcy court granted partial summary judgment to the trustee
on September 21, 1998, voiding the interest of Wintz Properties in each
of the three real properties. On the same day the court entered orders
authorizing sale of the properties.

[16]

On October 2, 1998, the Terminal Road leasehold passed to American
Freightways when that sale closed. *fn4
The motion by Wintz and Wintz Properties for a stay pending appeal of
the orders authorizing the sales was denied by the bankruptcy court on
October 6, 1998.

[17]

Wintz and Wintz Properties appealed the bankruptcy court decisions to
the Bankruptcy Appellate Panel. The panel issued two decisions. In the
one before us on this appeal it affirmed approval of the sales. See In
re Wintz Cos., 230 B.R. 840 (8th Cir. BAP 1999). In the other it
reversed the grant of summary judgment avoiding the transfers and
remanded those issues for further proceedings. See In re Wintz Cos., 230
B.R. 848 (8th Cir. BAP 1999). In respect to the sales, the panel held
that the finality rule of 11 U.S.C. § 363(m) (1994) prevented reversal
or modification of the authorizations of sale because the appellants had
not obtained a stay pending appeal and the sales were to good faith
purchasers. Id. at 845. Neither were the sales invalidated by the 'last
look' provision in the sales procedures. Id. at 845-46. The panel found
that the notice of the amended sales terms for the Terminal Road
property was sufficient, that the reduced sales price was not so grossly
inadequate as to require the sale to be set aside, and that the appeal
was moot because the sale had already closed. Id. at 847-48.

[18]

This appeal by Wintz and Wintz Properties now relates only to the sale
of the Terminal Road property because the parties have meanwhile settled
matters relating to the Rosemount property and mutually agreed to
terminate the sale of the Walnut Street property. Appellants argue that
the finality rule of 11 U.S.C. § 363(m) does not apply because the sale
of the Terminal Road property was contingent upon the avoidance of the
interest of Wintz Properties and the partial summary judgment voiding
its interest was reversed by the Bankruptcy Appellate Panel. They also
ask this court to set aside the sale and restore the interest of Wintz
Properties because the notice of the amended sales terms was inadequate,
the sale was tainted by the last look provision, and the amended bid for
the property was grossly inadequate. The trustee responds that the
finality rule of 11 U.S.C. § 363(m) moots their appeal and that in any
event the sales procedure was appropriate and maximized the value of the
property. Our standard of review for findings of fact is clear error and
for conclusions of law is de novo. See In re Food Barn Stores, Inc., 107
F.3d 558, 562 (8th Cir. 1997).

[19]

Contained within 11 U.S.C. § 363 is a rule of finality designed to
permit the sale of property in a bankruptcy estate to a good faith
purchaser. The rule allows value to be produced for the estate while
protecting the rights of purchasers. Under the statute, a "reversal
or modification on appeal of [a judicial authorization] of a sale or
lease of property does not affect the validity of the sale or lease ...
to an entity that purchased or leased such property in good faith ...
unless such authorization and such sale or lease were stayed pending
appeal." 11 U.S.C. § 363(m). Appellate courts have interpreted
this section to prevent the overturning of a completed sale to a bona
fide third party purchaser in the absence of a stay. See, e.g., United
States v. Fitzgerald, 109 F.3d 1339, 1342 (8th Cir. 1997). This rule
protects the finality of bankruptcy sales and the reasonable
expectations of third party purchasers. See Veltman v. Whetzal, 93 F.3d
517, 521 n.4 (8th Cir. 1996). It also reflects the inability of courts
to supply a remedy once property has left the bankruptcy estate. See id.
; see also In re Van Iperen, 819 F.2d 189, 191 (8th Cir. 1987) (per
curiam) ("Once collateral is taken and converted into cash, no
court is able to formulate adequate relief to the debtor."). Claims
against the property once sold may be maintained only against the
proceeds of the sale. See MacArthur Co. v. Johns-Manville Corp., 837
F.2d 89, 93 (2d Cir. 1988).

[20]

In this case, the trustee and American Freightways entered into an
agreement for the sale of the Terminal Road leasehold pursuant to an
auction procedure. The modified purchase agreement was approved by the
bankruptcy court, and the sale was authorized. Appellants did not obtain
a stay before the property was transferred to American Freightways. The
estate received approximately $1.5 million on closing, and these funds
remain within the estate. Rather than waiting to seek payment from those
proceeds should they defeat the fraudulent conveyance claims pending in
the bankruptcy court, appellants want to overturn the sale to American
Freightways.

[21]

Appellants assert that the finality rule should not apply in this case
because two provisions in the purchase agreement made the purchase by
American Freightways subject to the reinstatement of the interest of
Wintz Properties. They rely principally on In re Cada Investments, Inc.,
664 F.2d 1158 (9th Cir. 1981), in which the Ninth Circuit held that a
predecessor finality rule did not control where an express term of the
purchase agreement provided that the purchase was made "subject
to" an asserted interest of a prior unsuccessful bidder. Id. at
1160. The provisions of the purchase agreement in our case differ from
the one in Cada since they did not subordinate the interest of the
purchaser to a third party. Rather, the agreement vested American
Freightways with the option of withdrawing from it if the trustee were
unable to deliver the property clear of the interest of Wintz
Properties. *fn5

[22]

Another provision made the obligations of the parties to perform under
the agreement contingent on certain occurrences. *fn6

[23]

These provisions applied to the parties to the agreement and they did
not vest any third party, including Wintz Properties, with enforceable
rights. The option of American Freightways to withdraw was no longer
available after the trustee succeeded in setting aside the interest of
Wintz Properties, and the bankruptcy court authorization of sale
satisfied one of the contingencies built into the agreement. Although
the agreement was also contingent on the expiration of time for appeal
from the authorization of sale or the final resolution of such an
appeal, the parties closed the sale before either occurred. By carrying
out their obligations under the agreement they gave up their right to
withhold performance. See Steinhilber v. Prairie Pine Mut. Ins. Co., 533
N.W.2d 92, 93-94 (Minn. Ct. App. 1995). This purchase agreement does not
provide appellants an escape from the rule of finality generally
applicable to bankruptcy sales.

[24]

Because appellants failed to obtain a stay pending appeal and because
the property has been transferred to a bona fide third party purchaser,
their attempt to overturn the sale of the Terminal Road property is
barred by 11 U.S.C. § 363(m).

[25]

Even if 11 U.S.C. § 363(m) were not a bar to appellants, their other
arguments do not succeed. They assert that the sale should be set aside
because the last look provision tainted the sale, the notice of the
amended sales terms was inadequate, and the bid price was so grossly
inadequate the bankruptcy court should have reopened bidding. We will
take up these points individually but observe at the outset that
bankruptcy courts have wide discretion in structuring sales of estate
assets. See, e.g., In re Food Barn Stores, Inc., 107 F.3d 558, 565 (8th
Cir. 1997). They have "ample latitude to strike a satisfactory
balance between the relevant factors of fairness, finality, integrity,
and maximization of assets. [They] must be accorded sufficient
discretion to decide the truly close cases as best [they] can in view of
these competing considerations." Id. at 566 (internal quotation
marks and citations omitted).

[26]

The sale procedure approved by the bankruptcy court provided for
competitive bidding calculated to maximize the value the estate might
obtain. Bidders were sought out by a qualified real estate agent,
written bids were solicited, and the high bidder selected. The three
highest bidders were then given another opportunity to submit new bids.
The 'last look' provision applied only after the first two rounds of the
auction and only if there were an objection on the grounds of inadequate
bid and submission of a higher bid by the objecting party. The inclusion
of this provision may well have enhanced the initial bidding, since it
gave the high bidder some protection against an eleventh hour attack on
its bid, but it was never triggered. Appellants cite one case in support
of their attack on the provision, but it is readily distinguishable in
that it involved a bankruptcy court setting aside state legislation that
significantly hindered the ability of trustees to structure sales. In re
Rancourt, 153 B.R. 380, 383 (Bankr. D.N.H. 1993). In this case, by
contrast, the bankruptcy court approved a limited last look provision
structured by the trustee to maximize the value of estate property.

[27]

Appellants argue that the notice given of the amended sales terms for
the Terminal Road property was inadequate under the authorizing statute
and in respect to the time given for new bids. The statute states that
"[t]he trustee, after notice and a hearing, may use, sell, or
lease, other than in the ordinary course of business, property of the
estate." 11 U.S.C. § 363(b)(1). The bankruptcy rules require 20
day notice be given to all parties in interest for any such sale not in
the ordinary course of business. See FED. R. BANKR. P. 6004(a) and FED.
R. BANKR. P. 2002(a)(2). The initial notice of sale in this case was
provided by the July 24, 1998 motion served on all parties in interest.
This satisfied the statutory requirement of 20 day notice. The amended
motion to authorize sale did not require another 20 day notice period
because it concerned the same sale, and the notice given was sufficient
to allow new bids to be submitted in light of the changed terms of the
sale.

[28]

Appellants assert that because the net proceeds to the estate under
the terms of the amended purchase agreement were substantially lower
than under the original agreement, the amended bid was "grossly
inadequate" and the bankruptcy court should have ordered the
property remarketed instead of authorizing the sale. A bankruptcy court
has an obligation to reopen bidding "where there is a grossly
inadequate price or fraud in the conduct of the proceedings[.]" In
re Food Barn Stores Inc., 107 F.3d at 565. In this case, however, there
is no evidence that the amended bid submitted by American Freightways
was grossly inadequate. Both of its bids were subject to scrutiny by
prospective purchasers, who declined to submit higher bids. Moreover,
the difference in price between its first and second bids is readily
explained by the need for the trustee to cure defaults in the leasehold
before the lessors of the Terminal Road property would consent to the
transfer of the property and by the need to adjust the sale price to
reflect the shortened lease term. Cf. In re Kendall Foods Corp., 122
B.R. 792, 793 (Bankr. S.D.Fla. 1990) (substantially larger bid made
after close of bidding without any change in conditions of sale
supported inference that winning bid was grossly inadequate).

[29]

For these reasons, we affirm the authorization of the sale of the
leasehold interest in the Terminal Road property to American
Freightways, Inc.

[30]

A true copy.

Opinion Footnotes

[31]

*fn1 The Honorable Gregory F. Kishel,
United States Bankruptcy Judge for the District of Minnesota.

[32]

*fn2 The Honorable Frank W. Koger,
Chief Bankruptcy Judge, and William A. Hill and Barry S. Schermer,
Bankruptcy Judges, for the Bankruptcy Appellate Panel for the United
States Court of Appeals for the Eighth Circuit.

[33]

*fn3 The master lease for the
Terminal Road property stated the term of the leasehold in two different
ways: as a forty year term and as running from January 1, 1964 to
December 31, 2004. The lessors would only consent to transfer for the
term ending January 1, 2004.

[34]

*fn4 Although American Freightways
is listed as an appellee in the caption for this appeal, it did not
submit a brief or appear at oral argument.

[35]

*fn5 This provision provides as
follows: 5. Avoidance of Leases: The Trustee has commenced an adversary
action in the U.S. Bankruptcy Court for avoidance of a purported
assignment and sublease to Wintz Properties. In the event the Trustee is
unsuccessful in setting aside or transferring the property free of any
such interests within 120 days from the date of this Agreement,
[American Freightways] shall have the option to proceed under the terms
of this Agreement, subject to any existing interests, or may withdraw
its offer and receive a refund of its earnest money. Appellants' App.,
409.

[36]

*fn6 This provision provides: 14.
Contingencies. The obligations of Trustee and [American Freightways] are
contingent upon the occurrence of the following . . . b) The
authorization of the transaction contemplated by this Purchase Agreement
by an Order of the United States Bankruptcy Court for the District of
Minnesota (St. Paul) for the Trustee to assign the estate's interest
pursuant to the United States Bankruptcy Code, which shall be free and
clear of interests in such property of Wintz Properties or any entity
other than the bankruptcy estate . . . c) The expiration of time in
which any party may appeal from such Order referred to . . . above or a
final resolution of an appeal from such order by which the sale
contemplated by this purchase agreement is approved. Appellants' App.,
411.